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Vanderbilt Law Review

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Abstract

Convergence theory and shareholder empowerment represent two major debates in contemporary corporate governance. A pervasive underlying assumption in these debates is that a high level of corporate governance homogeneity exists within the common law world in relation to shareholder rights. This Article challenges that assumption through a detailed case study of the decision by News Corporation ("News Corp.") to move from Australia to Delaware. As events surrounding News Corp.'s reincorporation illustrate, although there are undoubtedly basic similarities between corporate law in the United States and in other common law jurisdictions, there are also fascinating, but underappreciated, differences.

In late 2007, News Corp. became the subject of intense media attention when it successfully acquired Dow Jones & Company ("Dow Jones"), publisher of the Wall Street Journal, and brought it under the aegis of News Corp.'s $70 billion global media empire. Nonetheless, News Corp.'s migration to the United States from Australia, which paved the way for this victory-a victory that appears increasingly Pyrrhic in the light of the global financial crisis-was neither smooth nor a fait accompli. Rather, the original 2004 reincorporation proposal prompted a revolt by a number of institutional investors concerned that the move to Delaware would significantly diminish shareholder rights. The institutional investors attempted to respond to this threat by demanding that News Corp. make certain concessions preserving existing shareholder rights under Australian corporate law. As this Article demonstrates, however, the protection embodied in these concessions was later effectively subverted by a variety of means. The News Corp. reincorporation saga highlights some important differences between current U.S. and Australian corporate law regimes. Specifically, the reincorporation shows how shareholder rights were reduced as a result of these differences. It offers a valuable counterpoint to the persistent assumption in much contemporary legal theory that a cohesive Anglo-American model of shareholder protection exists, and it identifies some crucial corporate governance fault lines within the common law world.

The News Corp. story also has significant implications for Delaware law. It demonstrates, for example, that Delaware's preference for managerial fiat over strong shareholder rights may provide Delaware with a competitive advantage in encouraging reincorporation by foreign companies. Nonetheless, the concessions granted by News Corp. to its institutional investors directly conflicted with Delaware's cardinal principle of centralized managerial power.

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